Stablecoin dividends would be banned under the recently released agreement between U.S. Senators Thom Tillis (RN.C.) and Angela Alsobrooks (D-Md.), which addresses the contentious piece of legislation on the structure of the crypto market in a compromise that is largely similar to what has been discussed since the start of the year.
The text, released on Friday, will prohibit stablecoin issuers from offering returns based on simply holding stablecoin reserves, saying that “depository institutions provide financial services that are integral to the strength of the U.S. economy,” and stablecoin issuers that offer similar services “may hamper” those institutions.
“No Covered Party may, directly or indirectly, pay any interest on returns (whether in cash, tokens or other consideration) to a Restricted Recipient – (A) solely in connection with the holding of such Restricted Recipient’s Stable Coins; or (B) on a Stable Coin Balance in a manner that is economically or functionally equivalent to an Interest Payment Text or equivalent to the Interest Payment.” said.
That restriction does not apply to incentives “based on bona fide activities or bona fide transactions” other than dividends generated by interest-bearing bank deposits, the text says, maintaining an approach to rewards similar to what financial companies offer on credit card activity. The limitation applies to loyalty programs or similar efforts.
Senators Alsobrooks and Tillis have been negotiating the text for the past few months after a Senate Banking Committee markup on the overall Clarity Act was postponed at the last minute in January. In March, they presented an agreement that blocked crypto firms from offering returns similar to deposit rates, but allowed them to structure rewards programs that did not compete with banks’ core products.
In a statement, Digital Chamber CEO Cody Carbone said the industry association “welcomes the public release of stablecoin dividend language as an important step toward resolving one of the final issues standing between the committee and a markup. We are encouraged to see this process move forward and will continue to advocate for the power of rewards to drive consumer utility, competition and innovation across the digital asset ecosystem.”
Carbone also called for a committee markup.
